Typically, companies leverage out their balance sheets during times of durress. Although the past few years has been anything but stellar for the economy, it has been growing. What’s particularly unusual about the amount of debt issuance is that it’s coming at a time when growth is abundant, which makes the fall that much more onerous–whenever it may come.
For the year of 2015, company share buy backs and dividends topped 1 fucking trillion dollars. Although that number is set to decline in 2016, the numbers are still staggering.
Corporate bond sales surpassed $1t last week for the fifth consecutive year. Collective debt now stands at a record 2.4x earnings.
“The investment-grade ‘safe’ part of the market is becoming the most dangerous,” said Ashish Shah, chief investment officer at AllianceBernstein LP. “There are so little returns out there. People are crowding into whatever they can.”
Total corporate debt has grown 10% per annum since 2009 and +16% in 2015. Simultaneously, EBITDA dropped by 4% during 2015.
Most of the issuance is occurring in the energy and healthcare sectors, where fuckheads run around like chickens without heads, buying back their own stock instead of investing in their businesses. The result has led to the sharpest decline in productivity in decades.
Between the growing debt bombs in both China and the United States, the global economy will need to grow a lot in order to ease the burden that is being applied to corporate balance sheets.
Also, U.S. Federal Debt is on the cusp of topping $20 trillion.
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Rumor has it that when a ponzi scheme implodes they ring a Dell. The possible last lie/straw exposed of the globalist scam. The black hole is getting bigger.
This is going to be a shit show….
Nah. It will be the tranny show. Switching between hate filled psychopath or acid eyed half dead zombie. It will be the worst circus ever. Child abduction and slavery both making a yuge comeback with TB and leprosy. A true new way of life. lol
If you’re an enterprise and have a sound plan to make money, is there a better time in modern history to finance it? This isn’t debt at 8%, it’s at 1%.
If you have even an inkling that you’ll need cash to finance something, you’d be stupid to not go get the money now.
How’d that work out in 2008?
Also, what is that money being used for?
2008 was a few QE ago, hard to remember now. Where we are now is not because of 2008 causes.
To keep you alive if you’re an energy company, a miner, or a shipper. Point is, gov’s are pretty committed to keeping businesses alive.
the elite never see the pitchforks coming.
The elite never seem to run out of free money.
I remember 2008 like yesterday and 2011 like 15 minutes ago.
What are the possibilities for tomorrow?
Buying back stock to juice executive bonuses is not “a sound plan to make money” unless you are the executive in question or a short term investor. Well, I guess that covers everyone that matters.
Cascadia makes a good point. If someone wants to lend at 1% why not not take it provided what you are doing with the money gets a better return and you have the free cash flow to service the payments (with a cushion). Problem is most of these CFO’s don’t stress test and if cash flow declines modestly then defaults escalate.
if you have too much supply taking out a loan to add to supply is insane. in a culture where money is supreme, perversity is extreme as money is a concept not reality. the current state of humanity is that we live in our heads and not connected to reality. this disconnect has gotten terminally risky. its pitchfork time as that is the only real solution at this stage. the elite are always too confident fighting people who have nothing to loose.
If they were taking the money to invest in their businesses, I’d agree. That would permit them to grow out of the debt. But productivity is at 1980 levels and EBITDA is negative. They’re using the money to buy back stock.
http://www.valuewalk.com/2016/08/sp-500-debt-to-ebitda-soars/
Even though EBITDA is declining/slow, debt to equity is not at unsustainable levels. My hypothesis is that we are in a market lull, before a major rise in the market (and subsequently a decline afterward)…
Here is my game plan. Sell all longs if you haven’t yet. If you’re a day trader buy UVXY at the open and sell at the close on Monday. From Tuesday on will not be easy to trade at all.
Eventually the fed will have no choice but to start massive QE buying to prevent systematic failure. But the impact of the move will be failure of fiat currencies. So when the fed announces we, get your money into bitcoin.
World dog show to be held in China?
This is truly funny.
Using debt to buyback shares. I don’t believe it ends well. Companies end up with a bunch of debt at just the wrong time in the economic cycle, robbing them of the working capital for new projects and R&D.
fracking, healthcare and education added to already supply.
by the way buy back stock and increasing P/E is cancerous.
productivity is low cus they keep printing. only way to spark increase productivity is deflation.